"Bringing Teeth to Mandatory Business and Human Rights Rules: A Conversation with Rachel Chambers and Anil Yilmaz Vastardis ", August 2021

[This interview is available in full on the Rights CoLab website, please click on the "Read more" button]

...Rachel Chambers of the University of Connecticut and Anil Yilmaz Vastardis of University of Essex address [the role of a regulator in human rights and environmental due diligence laws] in their article, “Human Rights Disclosure and Due Diligence Laws: The Role of Regulatory Oversight in Ensuring Corporate Accountability,” published earlier this year in the Chicago Journal of International Law... Joanne Bauer of Rights CoLab and Columbia University sat down with Rachel and Anil to discuss their proposal and its political feasibility.

Joanne: Rachel and Anil, it’s great to see the detailed proposal you lay out in your article for a regulatory oversight body to accompany human rights disclosure and human rights due diligence (HRDD) laws. We know that in general the reports that companies have produced in response to transparency laws have been weak. And, as you say in your article, even as we see more promise in human rights due diligence laws - including the prospect this year of an EU law that will have a civil liability provision - without regulatory oversight, the burden of accountability rests entirely with civil society. So your article is very timely. What motivated you to write it?

Rachel: My research focuses on the use of corporate accountability mechanisms for ensuring that businesses respect human rights. Anil’s research focuses on the intersection of corporate law, human rights law, and tort law. In an earlier article, we wrote about the EU Non-Financial Reporting Directive and the potential promise its human rights reporting provisions had for facilitating access to remedy for victims of human rights violations by corporate actors. Returning to study the Directive, and other disclosure and due diligence laws, a few years later, we found that they had not achieved their purpose...

...Anil: New disclosure and due diligence laws are emerging, but when we looked at the situation on the ground we didn’t see things changing meaningfully for workers and communities in global supply chains... In the existing model of disclosures and human rights due diligence, the stakeholders have few if any formal mechanisms to ensure the accuracy of disclosures and adequacy of HRDD processes. The regulatory body we are proposing can exercise annual checks on the accuracy and adequacy of reports - or on even if companies produced them - based on complaints from stakeholders on reporting deficits or another means of selecting a sample of disclosures for review.

Rachel: We don't think any of the existing oversight models of standard corporate reporting are up to the task so we're recommending a sui generis model, which has five attributes: First, a formal list of businesses covered by the disclosure and due diligence requirements and a publicly accessible repository for storing annual disclosures. It also needs to have an institutional structure to exercise oversight and enforcement functions. It would provide reporting and due diligence guidance for companies. Next, the regulatory body should be able to impose meaningful penalties for failure to comply with the relevant laws. Finally, in order to fulfil these functions, the body should have human rights subject matter expertise - it has to have the capacity to understand and advise stakeholders on the complexities of corporate human rights impacts

...Joanne: Talk about the role of civil liability in relation to the regulatory body. Are you concerned that the push for a regulatory body such as the one you proposed will make governments less likely to include a provision for civil liability in their laws?

Rachel: Governments may feel that they have done enough by establishing regulatory oversight and there is no need for a civil liability provision. This is definitely a concern. In the German draft law, for example, we don’t see any form of civil liability. We agree with civil society advocates that civil liability is a vital component.

Anil: Exactly. Some within civil society are rightfully worried that we can’t have everything... I still think all options should be on the table at the start of the process... There is going to be an important role for courts. Civil liability should be part of any due diligence law because that’s where victims get access to remedy. A regulator would not replace the remediation function of courts. The regulator should take a distinct role to monitor the presence and accuracy of due diligence reports. This can ease the burden on the courts...

...Joanne: ...Let’s move to investors. In your paper, you argue that investors are beneficiaries of good disclosure. They are also enforcers. Understanding risk is an essential part of the investment calculus and investors will shy away - and sometimes divest - from companies that aren’t disclosing those risks. That has real consequences for business and can be seen as its own type of enforcement. Your proposal for a strong regulator adds a layer of urgency for investors since failure to disclose or inadequate disclosure presents a legal/regulatory risk... potentially exposing the company to financial penalties, which amounts to material financial impact.

I also find it interesting that investors sit in the background of these conversations around regulation and enforcement, but tend not to be part of these conversations. Yet, there is strong alignment of interests between investors and civil society because of that element of risk...

Rachel: There are two gains for investors from an effective and well-resourced regulator in this area. One is greater information accuracy. Investors want better and more accurate information about what is going on in the environmental and social sphere... Another gain is the oversight and enforcement of due diligence laws. The argument there is all about the quality of information disclosed and the quality of processes that companies engage in to understand the environmental and social impacts. If a company is hit with a fine, the investor should be able to foresee that...

Anil: In the article we did not focus very much on investors, as we have more faith in civil society than in investors to drive change. But we still think that committed investors have an important role to play alongside civil society in pushing companies towards better disclosure. Investors need good quality information and HRDD processes to make better informed decisions...